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I’m opening a small business and was directed to file as an LLC so as to protect my personal assets. But everyone that I would like to setup an account with wants a personal guarantee whether I’ve been in business 1 or 10 years. What good does the LLC serve under those conditions? I understand about the lawsuit protection aspect, but where’s the personal asset protection?

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3 Responses to “What is the purpose of an LLC when everyone wants personal guarantee before setting up an account?”

1. momofmodi on October 11th, 2009 6:34 am

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   There is no personal asset protection. An LLC is a really good theory, but it doesn’t really work out to be one. I currently own an LLC as well and have several accounts that I have had to do personal guarantees on, so no matter what I’m screwed in the end if something happens to the business.

   Our lawyer kept telling us that an LLC was a great way to go as far as protecting you. But he never once mentioned that you won’t get credit with anyone if you don’t sign a personal guarantee.

   Good luck.

2. William H on October 13th, 2009 8:56 pm

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   You answered your own question.

   You have to be a new business if your vendors want a personal guarantee. But once you get established, you should cancell the personal guarantees and then the LLC will be more benificial to you.

   New businesses are high risk and the people selling to them want to try and insure that they are going to get paid for what they sell to them.

3. Richard F on October 15th, 2009 9:18 pm

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   The purpose is to be able to take certain tax deductions.
   So figure it from that standpoint. And there is a little protection.